Investment Canada has recommended approval of a hostile foreign takeover bid for Potash Corp. of Saskatchewan, leaving Prime Minister Stephen Harper to decide on a deal that could trigger a political fight in a key Conservative stronghold.
BHP Billiton Ltd. concluded negotiations on the weekend with Investment Canada, and satisfied officials that the Australian firm met a "net benefit" test, meaning the $38.6-billion (U.S.) deal will have a positive economic impact, according to people familiar with the situation.
But Mr. Harper has the final word. The Prime Minister, in consultation with Industry Minister Tony Clement, must give the final verdict on whether a deal to transfer control of a key resource to a foreign owner is indeed in the national interest.
Saskatchewan Premier Brad Wall said approval of the deal would be "a profound betrayal of our province and its people" and did not rule out a constitutional challenge based on provincial ownership of resources. His opposition poses a serious political challenge to Mr. Harper's minority government, which holds 13 of the province's 14 seats in Parliament.
"Saskatchewan's position remains resolute," Mr. Wall said Monday. "The proposed takeover does not provide a net benefit to the people of Saskatchewan and Canada and must not be approved by the federal government."
The Harper government has a Wednesday deadline to decide whether to approve BHP's bid, which would come with legally enforceable commitments to boosting jobs and investment in the country, and would establish an independent watchdog with the power to monitor company promises and impose penalties.
Mr. Wall argues Saskatchewan's dominant position in the potash industry - with 53 per cent of the world's reserves - should not be handed to a global multinational to develop, and that Canada needs corporate champions in key resource sectors. It is a line of reasoning that Mr. Clement has some sympathy with, Conservative sources say.
Federal approval of the BHP deal would pose significant political risk to Mr. Harper's future electoral ambitions. Opposition parties are threatening to force a general election in early 2011 and hoping that an unpopular decision on Potash Corp. would weaken the Conservative stranglehold in Saskatchewan.
The Conservatives see little political gain to be made from approving the deal, and plenty of downside - though the electoral calculus is supposed to play no role in the decision.
Tapping into Saskatchewan's penchant for populism, Mr. Wall has successfully galvanized the public with his heated opposition to the deal - a campaign that potentially leaves the province's federal Tories caught between their Prime Minister and their conservative-minded Premier.
"To me, there's no question that the citizens of Saskatchewan support the Premier's position," said Saskatchewan Conservative Senator David Tkachuk. "I think this is a very important decision."
Conservatives hold 13 of Saskatchewan's 14 seats - Liberal MP Ralph Goodale's riding of Wascana being the only exception. But unlike the Conservative stronghold of Alberta, Saskatchewan voters historically swing between Conservatives and New Democrats, both provincially and federally.
Mr. Tkachuk suspects that regardless of the decision, the potash issue will fade over time. The NDP and Liberals are hoping otherwise.
Some Conservatives predict the issue could hurt the party in the province's closest ridings - seats that Mr. Harper can ill afford to lose.
"It could very well cost them seats if they were to approve it," said Dimitri Pantazopoulos, a pollster with Praxicus Public Strategies who has previously led public opinion research for the Conservative Party. "On the other hand, they have to deal with their ideological base, and their ideological base isn't totally enamoured of having government control over private corporations."
Mr. Wall's aggressive campaigning against the deal has riled public opinion in Saskatchewan, where voters previously tended to oppose the takeover but did not have strong opinions, said pollster Lang McGilp, of Saskatoon-based Insightrix.
Indeed, Conservatives privately concede that public opinion is running as high as 80 per cent against the deal, and that one private poll suggests the party could lose as many as a half dozen of their 13 seats in the province if Ottawa approves the deal and Mr. Wall continues to campaign against it.
In a statement Tuesday, Mr. Clement denied that a recommendation has been made by Investment Canada, and said no decision has been made.
The minister added that he - not the prime minister - would make the decision. However, multiple sources close to government say Mr. Harper will have the ultimate approval.
Bill Curry